Big turnout at Complex property valuation seminar in Cebu

Appraiser Agosto, lectures on Complex Property Valuation-Valuation Masterclass II. The seminar workshop, held in Castlepeak Hotel in Cebu City,  was organized by PAREB Cebu Real Estate Board.

The seminar participants reached to more than 80 real estate practitioners, including real estate appraiser and brokers not only from Cebu but also from Negros, Cagayan de Oro and Leyte.”I was stunned by the turnout of participants”, Gus told the organizers of the seminar. “It just showed that practitioners values the seminar”.

In the 2-day lecture, participants learned from different case studies actual application of solving appraisal problems using discounted cash flow method, opportunity cost, replacement value and market studies on township development.

“Thank you for sharing your expertise on us”, one of the participant shared in the lecture room. “Very knowledgeable in the topics discussed”, another participant shared.

The valuation masterclass is a project of PAREB Academy for its members. Its objective is to raise the level of PAREB Appraiser-members professional practice through seminars, workshop and provide linkages through appraiser’s directory.

Appraiser Gus Agosto has conducted lectures already in different areas of the country. Hosted by different local board, he traveled Iloilo City, Dipolog City, Cagayan de Oro, Pasig, Caloocan, Lucena, Puerto Princesa, Baguio, and other areas.

 

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Letter to the editor on Valuation Profession

Dear Editor,

This is in response to the article of Mr. Ramon Clarete  published on 6 January 2019 on Property Valuation Service: Are we losing competitiveness?

I thank Mr. Ramon Clarete for his interest in our work and for the stimulating comments which highlights our profession and offer a broader perspective. I am certainly in agreement with the writer  on the role of property valuation to economies in weathering crisis.  However, I was appalled on some points of his letter and allow me to comment. His assertion on the maturity of the real estate appraisal profession; quality of service and the valuation standards are quiet disturbing.

Real estate appraisal in the country is in its infancy stage, as a profession. Even though it started in 1961 but it was considered as a trade rather than a profession. However, on July 2009, the passage into law of the Republic Act 9646 or the Real Estate Service Act of the Philippines (RESA), real estate appraisal has been recognized as a profession and strengthened.

Mr. Clarete pointed his pen on the 90% of the appraisers. He consistently mixes the know-how in real estate practice and the quality of service. However, Mr. Clarete misses the point.  The number of appraisers might triple in number, but the question is do the opportunities to practice the profession also tripled?

 

To practice the profession, appraisers have been subjected to different barriers that only few can endure. Take for example the government projects under President Duterte, the Department of Public Works and Highways required appraisers to have an accreditation with the Bangko Sentral ng Pilipinas to qualify in a bidding.  BSP has its own criteria in evaluating of appraisers outlined in their guidelines “BSP Acceptable Appraisal Companies for Ocular Inspection and Appraisal of Real Estate Properties”. To be part of the list, the appraiser or the appraisal company must comply with certain criteria to be accredited. One of which is the setting of company net worth to P 4 Million; and the other one is the setting of ten (10) years’ experience in real estate appraisal business as a requirement to manage and sign the appraisal report.

Securities and Exchange Commission, Energy Regulatory Commission other government agencies and even commercial banks have their own guidelines and requirement. It is not surprising that only 11 companies, as of December 31, 2017, were accredited by the Securities and Exchange Commission, and 22 under the BSP.

In the broader context, these accreditation requirements and non-implementation of certain provision of Real Estate Service Act have a multiplier effect to appraisal practice. Negating the appraisers of the opportunity to participate in government projects and practice their profession. And it has been 10 years now.

On the International Standards.  Mr. Clarete should never forget that the International Valuation Standards was adopted and prescribed as the reference standards in the country only on October 2009, by prescribing the Philippine Valuation Standards. It is only since then that the country laid down the foundation, through education and training, in developing the capability of property appraisers in the country to be at par with other countries. Thus, appraisers now are attending international seminars and conferences to learn best practices of other countries and also share our situation and experiences. In an increasingly globalised world, the consistency and compatibility of standards across jurisdictions is an important issue

The valuation practice and standards in the appraisal are intertwined. Theories will remain a theory if it will not be applied. Provide the appraisers with the venue to practice their profession, and they will surely rise to a new and higher level of professional practice.

We should endeavour in helping real estate appraisers to developed and fulfil its role in the economy, society and our people and be globally competitive in professional practice and standards. #

 

Read here:

https://www.bworldonline.com/letter-to-the-editor/?fbclid=IwAR0roGpyewKd7A_rTR4e89ToWgzjV9RR10TLElEADUCzLXCJr5DhMpUrWQw

Importance of Analyzing Market Trends in Real Estate Appraisal

value-riseA market is different from a neighborhood. In choosing comparables and reconciling values, it is worthy to consider the distinction between the two in analyzing market trends. This is vital in real estate appraisal.

A neighborhood is a grouping of complementary land uses. This is a geographical term and includes residential, commercial and even industrial uses within a neighborhood. Meanwhile, a market is the sum total of all competing properties of buyer and sellers in a given area or region under consideration. A market study is focused on competing properties. Therefore, in conducting market analysis one should not limit themselves in analyzing properties in a given geographical unit.

Most appraisers can easily identify appreciating market indicators. Some of which are the undersupply of competing properties and listings; reduced marketing time; an increase in list price than the previous sales price.

The presence of one or all of the indicators would be a signal of market appreciation and the appraiser should consider it in making adjustments and choosing comparables to produce credible reports.

The other method in analyzing the market trend is to distinguish the market if it’s a seller’s market or a buyer’s market.

In a seller’s market where a high level of competition exists, a seller will make concessions which are either non-existent or very minimal. This is in contrast to a buyer’s market where an abundance of competing properties exist and sellers are motivated to offer concessions to stimulate contracts.

A reliable appraisal, especially in dynamic and growing markets such as Metro  Manila and Metro Cebu, must consider real estate trends to offer the most insightful and complete valuation. When in doubt, consult with quality-oriented and experienced valuation professionals that specialize in market analysis.

Why valuation standards are important

I attended a seminar on Philippine Valuation Standards (PVS) recently and spoke to the technical committee members that produce it. The seminar was attended by Assessors of different local government units, nationwide. While the speakers were both members of the Technical Committee on drafting the Philippine Valuation Standards 2017.

I outlined the most important points in the discussion, relate to my experiences in valuation and share it with you.

Enhance the reputation of the profession and be at par around the world. Currently, there are multiple valuation methods used by different government agencies, local government units, private individuals, and banks. Thus it results in as many conflicting values for the same piece of property.

An established set of consistent standards would help in appraising assets and liabilities for financial reporting, especially for companies that control assets in various countries and work across national borders. For valuations for other purposes, the reputation of the profession would be enhanced if the clients could expect consistency in valuation reporting internationally.

Simplify the appraisal process. I work an appraisal for a client in U.S. and Australian federal territories, which typically require different standards. But if an appraiser-member of RICS is performing the appraisal in U.K., it should also comply with RICS standards, which differ in subtle ways.

PVS is the accepted set of standards for valuation in the Philippine setting. Contrary to some notions, it is not only applicable to the government agencies but rather it includes and should also be applied to bank institutions and private individuals.

A single set of standards and guidance notes would enable appraisers to produce a credible valuation with a similar report structure regardless of membership or the location of the asset to be valued.

An era of unified professional standards. There are many associations in the country which offer seminars and training for appraisers. All of this would be simplified through learning and adopting valuation standards. Regardless of which association you align with, the pathway for new appraisers to be a competent appraiser need to be consistent.

 With the Philippine Valuation Standards, the international valuation standards in the broader context, we now have a uniform term of engagements, report disclosures, recognized bases of value, terminology used in reporting and guidance notes.

We have valuation standards that are accepted regardless of location or the professional organization of the appraiser. What we need to do now is to encourage consistency and professionalism, further strengthening the public’s trust in valuations. The first step to this could be asking the members of multiple organizations who are active in the various leadership councils to ensure that their members are actively using the relevant sets of standards in their practice and continually looking for ways to streamline the process in a manner that works for all.

Our generation should be happy to be in the era in which we have now a uniform sets of standards. But there is still work to be done. We should endeavor to unite appraisers in different organizations and location to study, adopt and implement the valuation standards.

In this way, we can raise the level of consistency and professionalism, further strengthening the public’s trust in valuations.

 

Gus Agosto is the Vice-President for Visayas of the Philippine Association of Real Estate Board (PAREB). He is the Managing Owner of AA RealtyPro Solutions, an appraisal and consulting business organization. He also serves as faculty of University of San Carlos, Cebu City and took up Master of Arts in Economics (Candidate) in the same university. 

Due Diligence In Real Estate Transactions

811-Due-Diligence-When-Buying-Real-EstateReal estate transactions involve a significant amount of money and rights of individual. The due diligence process minimizes the risks and provides safeguards against determinable issues that may affect the real estate transaction.

Making the right decisions in real estate transactions can be a challenge without complete and accurate information. A traditional legal principle is “caveat emptor” or “buyer beware.” This is from the traditional rulings that courts would make that the buyer was stuck with whatever he or she purchased and would have limited recourse. Due to this likely result, buyers had to be extra cautious when making buying decisions.

Due diligence provides for a thorough investigation into a transaction. It helps the buyer learn more about the property, the documents, environment and operational fundamentals of the deal. This process helps avoid surprises after the transaction when remedies may be limited.

The actual scope of the due diligence process depends on the buyer’s needs and the transaction itself. If the buyer is a developer, he or she may have very different needs than when the buyer is purchasing the property for lease or investment. There are individuals who have a pending court case and interested in knowing the property to determine the site and use as evidence in court.

The due diligence process begins by determining the expected use of the property and use this information as a framework. Due diligence seeks to address a number of issues and identify important information for buyers. This information includes determining the property’s owners, boundary lines, the rights that come with the sale, the expected future use of the property and highest and best use as development options. The process should identify any issues related to the property title, easements, encumbrances, liens or other hurdles to complete ownership. Additionally, the due diligence process can reveal if there are any restrictions that might affect the use of the property or its development, such as environmental issues, zoning restrictions or legal compliance matters such as abiding by Agrarian Reform Law, NIPAS Act, Agriculture and fisheries Act, road right of way act, government programs and more.

The due diligence process can also reveal information as it is uncovered. For example, the technical description plotting cannot be close may pop up after the document analysis is conducted. Additionally, it is important to determine the real estate market and demographic data to predict the future demands in the area.  Site inspection will determine the actual topography, terrain, shape, boundaries, neighbourhood and existence of any occupants or informal settlers in the property.

Last but not the least, is the environmental assessment, to uncover any daunting environmental hazards or issues of the property such as gas leak, wet lands, or use of the property as manufacturing in the past.

The due diligence process is very important. Adequate time must be reserved for this process to be conducted thoroughly and carefully. Party in a transaction should be encouraged to provide specified documents and information to ease the transaction. Be aware of all interests, liabilities, expenses and possible uses for the property.

This information will allow parties in transactions to make an informed decision.

EnP. Gus Agosto conferred Fellow status

Urban Planner  Gus Agosto, a faculty of the University of San Carlos, was conferred  with Fellow Status by Social Watch Philippines and People’s Public Finance Institute at the University of the Philippines, Lahug, Cebu City,

Social Watch Philippines is the network of hundred non-government organizations that initiated direct citizens’ participation in national and local budget processes through the Alternative Budget Initiative (ABI), while People’s Public Finance Institute is a center that educates the general public, civil society organizations and individuals on national and local public finance processes working under the framework of citizens’ participation.

Fellowship is an honor bestowed upon individuals that contribute in further strengthening citizen’s engagement in public finance. The new Fellows are drawn from academe, practitioners and graduate students across Central Visayas.

“I feel quite honored that Social Watch bestowed Fellow Status upon me,” Planner Gus said. “By doing so, they have acknowledged my teaching work in public finance and its contribution in important ways to students, professionals and the broad public. It is both gratifying and humbling at the same time.”

As a faculty, he is teaching public finance at the University of San Carlos, Cebu. “I’m very interested with the topic, being an urban planner and economist; I’ve been involved in various ways in public finance.“ Planner Gus also has a professional interest in the role that a Fellow can play in supporting and improving public involvement in government finance.

Prior to the conferment, a two-day discussion on the development of public finance and citizen’s engagement was held in collaboration with Social Watch Philippines, United Nations Development Program and University of the Philippines-Cebu.

 

 

 

Key points in the appraisal report

Appraisal reportIn every appraisal assignment, the appraiser should see to it that the client understand not only the final value, but the appraisal report in its entirety.

Appraisal report is the product of the whole appraisal process. It is an important document for decision maker in deciding whether or not to accept any real estate transaction.It outlines the strength and weaknesses of a property. Thus, the conclusion in the report can make or break any real estate negotiations.

Beside market value, what are the other factors that a property owner, real estate practitioner or investor should look to in an appraisal report?

Here are some of the major factors to consider as you read over the appraisal report.

Proper identification of the property.The most important in appraisal is the proper identification of the property. Definitely, wrong property is wrong appraisal. The appraiser should indicate the correct characteristics of the property like shape, size, depth, age, topography and boundaries. Documents such as the property title and tax declaration should match with the public records in the city assessor, engineering, city planning and Bureau of Lands.

Market trends. If the market has been going up, but the report says the market is going down, that could not support the final value. The report should show if what is unfolding in the market, otherwise that could lead to erroneous adjustments in the report.

Neighborhood Boundaries. The neighborhood boundaries listed in the appraisal report should show the correct similar neighborhood on which the subject property and the comparable (comps) sales are located. It can make a big difference if the wrong comps are used from inferior or superior neighborhoods.

Selection of comparables. The comparable used are the good substitution of properties a buyer might consider purchasing instead of the subject property. It should almost identical with the property appraised. Otherwise, it is a wrong comps and questionable.

Adjustments.Some reports make an adjustment by just getting the  average of the total price of comps in the market. It does not reflect the real estate market and are not reasonable.

Measurements. In measuring the improvements, appraisal report should present  a relatively similar to official records or to what a buyer know of the property. It is important to double-check, in case of error.

Improvements. The report won’t show an adjustment for every single update, but the final value should consider improvements. Keep in mind of course that not all improvements contribute to value. For example, a swimming pool in the backyard probably won’t be a huge plus in a beach area.

Qualification of the appraiser. Appraisal report mirrors the experience and qualification of the appraiser. Property owner, investors and real estate practitioners should look for appraisers that are not only licensed but possess a certain level of experience. The report should indicate the client list and types of property appraised by the appraiser. This will show if the appraiser is qualified to do the assignment.

Now that you know the important elements of an appraisal report, its time to obtain a copy from your appraiser or bank loan officer.

Remember that your property is one of your most important lifetime investments. The money spent on a quality appraisal is well spent.

Benefits of appraisal services

Appraisal-of-HomeSome property owner downplays the importance of appraisal. In determining the price of certain properties for example, some still uses the zonal value as a benchmark in knowing the worth of the property. Other sees the appraisal as a process of comparing the listing price of properties in an area. There are price-sensitive client that bargains in lowering appraiser’s fee, while there are also reliant on the opinion of certain real estate practitioners in pricing their properties to evade in paying the appraisal fee.

There are financial implications on relying to non-expert in real estate valuation. If the practitioner missed some current comparable evidence, is weak in the technical analysis, or errs in the interpretation of data, it might result in aggregate loss in the real estate transaction or losing the whole transaction itself.

In our experience, with the help of an appraisal, a property owner was able to make a sound bank loan. An investor uses the advice of an appraiser to quantify risk and project yield; a landowner has successfully inked a joint venture deal using the appraisal; an asset manager gets advice that makes him or her wise decision maker; and a lawyer is able to rely on appraisers’ expertise in litigation and court testimony.

Appraisal is not a simple process or just a mandated evil for which a client grudgingly pays as little as possible. Appraisal is a service that, if competent and timely, brings a benefit to a client that far outweighs the fee.

Appraisal report is a living document forming the very foundation for decision making. Where else is a client going to get such a detailed investigation of his or her property and its market?  It is not just a document that the banker throws into a file and the client never sees.

In today’s changing real estate market, solving the issues is the most invaluable contribution of the appraiser.

How private appraisals differ from bank appraisal?

IBPS-Participating-BanksA lot of people are asking us if we can undertake valuations that may then be used to banks for mortgage purposes. Some also uses the bank appraisal fee as an argument to demand for a much lower appraisal fee from the private appraisers.

On the first question, our response is that some lenders do not accept a valuation from a third party appraiser, they have their own in-house appraisers. But getting the services of a private appraiser is beneficial for the landowner; it can be use in negotiation with the bank for a higher loanable amount.

Why bank appraisal has lower fee than the private? It is pretty simple, the banks will profit not in the appraisal but rather in the home loan transaction.

How then private appraisals differ from those provided by banks? Banks are interested in quick turnaround, thus the valuer assigned has to conduct valuation based on bank standards. Bank also has policies that served as guidelines to their in-house appraisers that concur to the company policies on home loans.

There are few appraisal companies that are successful in getting appraisal jobs from banks. They are mostly accredited by the Central Bank. Fees are low and turnaround time from receiving instructions to having to send the appraisal report is short. Situation that newly passed appraisers cannot cope up.

However, if a client gets the services of a private appraiser, they can instruct the valuer directly for their own purposes.  Not to side with the client, but in providing unbiased report. The most important client can expect as a minimum is a quality and independent report.

US court appointed expert witness

courtAppraiser Gus appointed and subpoenaed as an expert witness in  San Joaquin Superior County Court, Stockton, California. The court is  determining the value of  properties located in the Philippines which is under dispute and for disposition.

“I am humbled for the appointment and the opportunity to appear in a US Court as an appraiser witness.” Appraiser Gus replied upon knowing the order.

In its order, the court emphasized his role in the court proceeding citing the following:  “The appraiser provided an estimate of value for real estate properties in the Philippines. He has the the first hand knowledge of the properties, title information and estimated values which are crucial in resolving the property division aspect of the case.”

Prior to his appointment, Appraiser Agosto has served different trial courts in the cities of Lapulapu, Cebu, Mandaue and Talisay as court commissioner.  Beside working in the court, he has served clientele both in private and public. Some of them includes Miraizo Group of Hongkong, General Milling Corporation, SMC Lighterage Corporation, Southwestern University, Pilipinas Water Resources, Inc. and University of the Philippines. He was the former Managing Partner of Intech Property Appraisal, Inc. and Magaca Appraisal Konsult.

“It’s an opportunity to showcase our professional expertise in the USA, which is known as the hallmark of real estate industry.” Appraiser Gus told Appraiser News Online. “My job is to help the court in determining the value of the property under litigation.”

Appraiser Agosto is a National Director of the Philippine Association of Real Estate Board, Inc. He is also a faculty of real estate management and finance in the University of San Carlos, Cebu City.

 

Subpoena

 screen shot caption of the subpoena